U.S. Retained Tariffs on EU Goods, Shakes Turbulent Airbus
European stock market retraces after a four-day hike. DAX of Germany’s stock trading stalled 0.2% while France’s CAC 40 fell 0.1%. Similarly, Footsie fell 1%.
This comes after the US government decides to leave tariffs on Airbus and other European goods on status quo, 15% and 25% respectively.
Despite the EU’s advance to resolve 16 years of a dispute concerning aircraft subsidies, the United States is adamant not to give compromise to Boeing’s leading rival.
This resulted in Airbus stocks to drop by 1.2%. The aircraft manufacturer expressed its dismay over the decision and expects the European Union to look closely at the matter.
In July, Airbus S.E said that it will increase loan repayments to France and Spain as its bid to reverse US tariffs. Today, its efforts are wiped down the drain.
Last year, the United States won its bid to increase tariffs on $7.5 billion worth of European Union goods which affected many exports to the US negatively.
Scotch Whiskey imports by the US fell 33% between October 2019 to May 2020. This amounts to a $378 million decline from the same period last year.
To retaliate, the EU applied its proposal to impose tariffs for Boeing on WTO. The request is still in the process of approval.
Airbus vs. Boeing: Which Flies Better?
In incumbent statistics, Airbus gains a long-term advantage over Boeing in terms of shareholder returns, after the US aircraft manufacturer giant delivered only six jets for July.
Even before the pandemic, Boeing Co. has already experienced simultaneous setbacks after encountering technical problems with its 737 Max which led to plane crashes in Asia and Africa.
The 737 Max jets remain grounded, but recently FAA gave its preliminary approval for the design fixes of the model. Although, order cancellation for the troublesome jet continues, with no new orders coming.
On the other hand, the European plane maker also has its shortcomings. Airbus missed meeting analyst expectations in its earnings for the quarter. It recorded €12.9 outflows of free cash in the first half of the year.
The firm’s ability to maximize delivery of its jets will determine its performance in the medium term. Its outstanding order backlogs due to pandemic now stands at 7,584 commercial aircraft, including 145 parked aircraft in its facilities.
But a bright prospect comes with Airbus’ ability to make cash again in the future. This results in stocks rising by 3%.
Airbus S.E does not see increasing production level until 2022, since the aviation industry is one of the hardest hit by the still wreaking havoc COVID-19.
For the time being, the retained 15% tariff will pose an added burden to Airbus as it struggles to escape the cornucopia of problems imposed on air travel.
